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4 EIB - A POLICY-DRIVEN BANK Established by the Treaty of Rome in 1958 The House-Bank of the European Union Mission: –to support implementation of EU policies by providing long-term loan finance for projects promoting European integration Financial highlights –Subscribed capital EUR 150 bn –EIB shareholders: 25 Member States of the European Union –EIBs lending in 2005: EUR 47.4bn –EIBs borrowing in the capital markets in 2005: EUR 50bn

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5 EIB LENDING PRIORITIES Economic and social cohesion in an enlarged EU Research, Development and Innovation Trans-European and Access networks Environmental Protection and Improvement, including Climate Change and Renewable Energy Support for SMEs

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7 EIB and LOCAL GOVERNMENTS The EIB as an institution originally conceived for lending to Member States –The Member States as the traditional Banks counterparts The shift of the 1990s –EU-led developments EU Subsidiarity Principle –Devolution of responsibilities to lower levels of government Organization of EU Cohesion Policy with sub-national levels as implementers of national and European policies –State-led developments Trend towards administrative and fiscal decentralisation Greater political and economical presence of regions and cities Greater presence of sub-national entities in capital and credit markets A trend to stay: –EU recognised strategic importance of regions and cities for growth and employment »Need for a sustainable urban development objective of 2007-2013 cohesion policy –Greater responsibilities delegated to Regions and Cities in the 2007-2013 cohesion policy

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10 EIB LENDING ACTIVITY FOR PUBLIC AUTHORITIES EIB 2005 total lending volume within the EU: EUR 42bn The average share of Public Authority Lending over the last five years amounts to some 35% Over the last 5 years, Public Authority Financing reached EUR 70bn Public Authorities include Member States, but mainly Regional & Local Authorities and public sector companies specific Include direct and indirect lending structures through banks

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11 RATIONALE FOR EIB PARTICIPATION IN A PROJECT The EIB can become involved either: Up stream, where the EIB financial contribution is critical and the EIBs technical know-how can influence the projects concept, Down stream, where the EIBs contribution supports the overall financial package, or Horizontally, where the EIBs loan amount complements EU grants (grant + loan =<90%).

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16 HOW IS THE EIB LENDING? Investment Lending Single Projects with a cost exceeding EUR 25 million, financed directly by the Bank or via an intermediary credit institution Framework Lending Instrument developed to assist public authorities faced with large multi-sector investment programs Global Lending Indirect financing of small and mid-sized investment schemes via partner banks

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17 WHAT ARE THE CONDITIONS OF EIB LENDING? Quality of credit conditions due to: - Triple AAA standing - Liquidity of EIB bond issues - Non-profit organisation –Large durations Up to 25 years and, in exeptional cases, up to 30 years –Long « Grace periods » Up to 6 years –No commitment fees –Flexible interest rate formulas that can be targeted to cash-flow of the underlying project –Different security options – sovereign and bank guaranteed, direct lending without guarantees, PPPs?..

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18 EIB COUNTERPART REQUIREMENTS? Detailed assessment carried out on all fiscal, financial, legal and operational features of the public authority… should be underpinned by a strong local economy, a sound revenue- generating base, and sufficient size in terms of population and revenues and by an adequate degree of fiscal and financial autonomy. A legal analysis must also confirm that the regulatory regime applicable to public authorities is such that, taken together with a financial position, demonstrates a capacity to repay the Bank's loans.. Acceptable financial and security structure Direct loans At least investment grade or the equivalent. Prudential financial ratios

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20 BENEFITS OF EIB FINANCING Flexible approach to projects – framework financing for municipal long-term investment programmes – up to 50% of project costs Low cost of funding, due to excellent – AAA – financial rating of the Bank and funding benefits passed on to the clients Flexibility in financial structure – long maturities, various options for currency and interest rate choice Supplementing EU Structural and Cohesion Funds, up to 90% of project costs Long lasting presence In the European market and expertise in various economy fields throughout the EU